Thursday, November 29, 2012

pastured eggs, full employment and illegal rainwater

I got a call from a fellow that I met a few years ago, at some farmers symposium or other. I know that it was a few years ago, because I stopped going to the majority of the events because they really didn't offer anything useful for me. Every now and then I hear about a session that I'm interested in, like the one on small grains in Washington State that Michelle attended recently, but that's the exception.

Catching rainwater illegal: who knew?
So I get this call, and I end up spending 90 minutes talking to him, and he's pretty funny, and has run a farm for a while, and we commiserated on various government issues. Like how he had to get a permit to catch rainwater off his roof, for instance. Turns out that he was one of the guys that was involved in drafting the regulations to allow it. Did you know you can go to jail for collecting rainwater?

100 dozen eggs a week?
What he's calling me about is that his pastured egg supplier had gone out of business, or was selling the eggs somewhere else, it wasn't really clear, but he needed some eggs. In fact, he'd like 100 dozen eggs a week, and would I be interested?

Full employment
One of the things that I take pretty seriously is providing as close to a full-time job as I can to my farmhands, and I'm always looking for something that I can give them that both produces revenue for the farm and keeps them gainfully occupied. Since we sell a lot of animals retail, chickens and piglets, I have to have someone at the farm all day; for those days when we don't do much in the way of sales, it's nice to have them doing something. The alternative is to send them home, which, basically, cuts their pay. A better solution is to keep an eye out for tasks like this one might be.

The egg scheme
He tells me he wants 100 dozen eggs, and wants a mix of colors. He'd like about 10-15% of them to be green or white or dark brown, so that they can be visually different for the customers who buy them. If they were all uniform brown eggs they'd look like costco, and he wants that as a marketing point. He'd also like to have them packaged in his packaging and under his brand name. I'm ok with that. I'd like him to pick them up from the farm gate, and pay for the packaging; my end of the deal is to take care of the birds, collect, clean and package the eggs, and make sure they had access to forage and were in good condition. With the basics ironed out, I sat down with my spreadsheet and started on what I would have to sell the eggs for per dozen to make it worth my while.

How many hens?
In my experience, chickens lay between 130 and 200 eggs per year per chicken. They lay more in the spring or when they first start laying, and less in the winter. You also can't count on 100% of the eggs to make it to market -- you'll need to produce a few more to allow for breakage and so on.

Green egg layers aren't as efficient as white or brown, and white egg layers, specifically white leghorns, are the best egg layers of all. So if we add green egg layers we offset by the same number of white egg layers and average out the production.

So to make 1200 eggs a week, we're going to need roughly 400 mature laying hens and those birds will produce about 1400 eggs a week on average, which gives us a basically 16 dozen extra eggs a week. So far so good.

To get 400 hens, I'd have to be safe and order about 10% extra (mis-sexed chicks, non-productive hens, random mortality), so I'd need to make an order for about 440 female chicks.

How much do hens cost?
Ok. Green egg layers cost more as chickens, white egg layers less, brown somewhere in the middle. Figure an average cost of $2.50/chick, including shipping. That works out to be $1100.00 Chickens convert food to meat at a rate between 2lbs and 4lbs of feed per pound of chicken. A hen weighs about 4lbs when she starts to lay, so we'll need 4*4 or 16lbs of feed to bring the chicken from chick to point-of-lay. Chick starter is more expensive than layer feed, and feed in general is very expensive. So lets figure 440 chicks * 16 lbs of feed, or 7040lbs. That's 3.5 tons.

"chicken feed" used to mean "cheap"
Right now commercial hog feed is $540 a ton. Chicken starter is $800 a ton. Chicken feed is $480 a ton. We'll need 1 ton of chicken starter and 2 tons of chicken feed to bring these birds to point-of-lay. That's $1760.

Large scale
to keep 440 chicks happy and warm you'll need three brooders, you'll need lightbulbs, and you'll need floor space. You'll also need feeders and waterers, and for this many chicks you'll need bedding and some labor as well. If you use my brooders and you use large-capacity feeders the labor is actually pretty small. You make sure that they have water, that the feeders are full, scan the flocks to see if any died, and that's about it. A little shed or horse stall works, or pretty much anyplace that doesn't have a draft. A tool shed. I'm going to ignore the costs for this equipment because I've already got it all. If you were to buy it, you'd need 3 5 gallon waterers, 3 brooders per the plans above, and probably 12 chick plastic chick feeders, graduating to 3 big rubber bowls as they start eating more.
Think $500 and you wouldn't be too far off. figure 1 hour of labor a day, and don't forget you have to pay yourself. I figure labor at $15/hour -- who wants to work for minimum wage?

Time
It takes between 4 and 5 months for a chick to start laying. 5 months * 30 days = 150 days. at 1 hour a day that's 150 hours, and at $15 an hour that's a labor cost of $2250.

And then you get your first egg
So the costs up to this point, before you get a single egg you can resell, are $5,610.

Now what does it cost you to operate?

Figure 400 or so chickens will eat 1.5 tons of feed, at a cost of $720. Labor costs go up -- collecting, sorting and packaging 1200 eggs, moving the hens to new forage, and keeping fences up and predators away -- figure 4 hours of work a day, or $1800 a month. Hens don't care about weekends. We'll need a refrigerator so that we can keep all these eggs cool - or two, actually. There will be some time spent bookeeping -- we're selling them, so they'll be invoices and so on.

Figure we'll get two years of laying out of our hens, so we need to divide the cost of bringing them to point of lay by 24, giving us $233 monthly cost, ignoring the cost of money itself.

So our breakeven point is the cost of operation ($720 feed + $1800 labor) plus the cost of raising the hens ($233), or a total of $2753.00 per month.

During that month we produce 400 dozen eggs, so if we divide our operating cost by 400, we get a cost of $6.88 a dozen at the farm gate. Lets say we want to make a 10% profit. That would put us at $7.50/dozen in round figures.

That's HORRENDOUSLY EXPENSIVE
Actually, it's not that bad. First, these are truly pastured eggs. The farm worker/farmer is paid a living wage that is competitive with other employers in the area = we can keep good people, and people who care about the animals and take their job seriously. We require no grants or other direct subsidies, and the impact on the land is pretty minimal with proper rotation of the chickens.

We could save money by doing what most major retailers do -- pay people the minimum wage. That would cut the labor costs substantially. Or we could keep the birds in big barns and never move them onto new pastures -- lots less labor, less chance of predators. That's what most of the eggs you see in stores do- "cage free" almost always means "never sees the outdoors, ever".

I wanted to ask why you didn't factor in the profit from selling/using the older hens, or the cost of disposing them if that's the way it's going to go.

In our area colored farm eggs go for a premium, in the $7-8 range. White farm eggs go for around $4-5 but the people I see selling them go around to the places that have small flocks, buy up their eggs and package them for resale. We used to have a monastery nearby that raised chickens and sold the eggs on a large scale but they got out of chickens when they were highly criticized for their husbandry practices, even though they kept the animals to a higher standard than required.

Garand Gal: There's a couple of costs that I didn't figure into this whole thing. There's cost for housing the birds. you're going to have to come up with an eggmobile or mobile coop of some sort, and you'll need to have it contain roosts for the birds at night, and either have nest boxes in it, or have a seperate laying area that is inviting to the chickens to lay in; otherwise you'll spend hours on an easter egg hunt every day.

The hens sell for $10 at the end of the two year laying cycle; so the total revenue from these 400 hens would be $4,000.00 less retailing costs. And if feed costs go down, or we have better survival, or fewer breakages, there's some chance for a bigger profit margin -- which would be good.

With this operating the biggest cost is labor. You see the eggs at the market for cheaper because they are raising 20 to 40 thousand birds with the same amount of labor as I'm raising 400 with. It's a LOT less work to deal with birds in a barn. Feed, water and egg collection are all automated.

And that small grains seminar I noted above is because I think that you could economically raise your own chicken feed in the form of some sort of small grain -- wheat, barley, oats... something like that. We have the right kind of weather for that sort of crop, and as the guy who talked about the seminar pointed out, you can buy a small combine for $6k.

First off, thanks for this post. This is exactly the kind of detailed info that got me following your blog in the first place. As my wife said on reading it: "Why would anyone ever go into this business!"

For sharing the spreadsheet, Google Docs is probably the easiest way to share. You should be able to upload any OpenOffice or Excel file with little no issues. If there are a lot of functions then SkyDrive/Office.com might be better but I have never used it for sharing so can't say for sure.

We sell eggs for $5/doz. Well that was before grain prices went up. In our market it's hard to sell organic eggs. Most don't. They just feed conventional feed. Most are priced $3.50/doz. People are so fickle.

I have a hard time taking people seriously who want you to do what this guy wants. I know too many farmers who were shot in the foot. Salitan had his buyer back out on him in the beginning ... for eggs even.

You should look into propane brooders. A little more up front cost but pretty awesome. No light bulb breakage. QCSupply has them but they sell them for piglet warmers. The smallest one will brood 150 chicks. Love mine! We're off grid so it makes brooding possible. We also put a temp control on so it will kick it on and off to manage the temp for you. Otherwise Robert Plamondon has excellent plans for an insulated brooding hover. We used those when we used electric lights.

As to rainwater... depends on the state and who's taking that states water. California, for example, takes Colorados water. Very illegal to collect rainwater there.

I sell more hatchlings than eggs. I always have a variety of poultry in the incubator and can usually provide what local homesteaders/hobby farmers what they want within a couple of weeks. At five to 10 dollars each I cover most of my feed costs. What I don't sell provides us with a lot of good meals in the fall and winter.

I sell one year old layers in the early summer for $12.00 and can't meet the demand. I like to thin in the summer to make room for pullets that will begin laying in the fall. If I don't I have a lot of hens that molt and quit laying for months.

I think if I only sold eggs I would never get the true value back. I sell eggs just to manage the surplus and consider our eggs primarily for family use.

I enjoyed seeing your numbers and wonder what the potential buyer thought about them.

First, we ONLY feed certified organic grain. When we were selling eggs which was about 4 years ago we were $5/doz. $3-$3.5 of that was feed and labor the rest infrastructure. We also bought grain direct from farmers and ground it ourselves. We had 200 laying hens. Now, we don't have a way to grind our feed at this point. But we still buy direct from tge farmer. We pay around $.20/lb. If we were to buy ground and mixed certified organic feed it would cost $1000/ton. Labor wise, we pay ourselves $10-$20/hr. We've gotta make a living beyond caring for the animals. We don't produce eggs to sell at this point. My hens currently free range and shmooze grain from the hogs. So its a little hard to account for their feed cost.

But I have a few observations from our experience. Chicks you hatch and raise yourself have better vitality and much less mortality. EXPECT to lose 10% of your shipped chicks. I believe strongly that chicks do much better with propane brooding because light 24/7 messes with sleep patterns and mental health. It's extraordinarily difficult to transition grown chickens into your system and expect them to produce the same as they did before. Really, that goes for any animal. Animals you buy are not your foundation their offspring are, generally the second generation is your foundation. We bought two cows out of Wisconsin, I can't expect them to produce the same here in SE KS. Completely different climate and forage. We would do better to buy animals that are from similar or hotter climates with similar forage. While they will aclimate, they won't do as well.

Anyway, off topic slightly. We are talking about chickens.

Cathy, that's pretty awesome with the hatchlings. I tried doing that but I didn't have pure stock so a hard sell. We are trying to hatch our meat birds: duck, chicken and goose. Then we pay ourselves for the hatchlings rather than a hatchery.